After Holmes `a Court's retreat from Texaco, what's his next move?

Selling half his 10 percent stake in Texaco Inc. to Carl Icahn represents a strategic retreat by Australian financier Robert Holmes `a Court. It may also foreshadow the sale of his holdings in Sears, Roebuck & Co. The sudden sale of Texaco holdings at a US$92 million loss might seem uncharacteristic of Mr. Holmes `a Court, a consummate chess player of renowned patience. At least, the timing looks poor.

Texaco stock is now climbing on reports of renewed discussions between the Pennzoil Company and the third-largest oil company in the United States. Texas courts ruled that Texaco sabotaged a Pennzoil merger agreement with Getty Oil in 1984. The courts awarded $10.5 billion. Texaco is fighting the decision (it goes before the US Supreme Court in February) but is under pressure from creditors to settle out of court sooner rather than later.

So why is Holmes `a Court bailing out?

The move, Australian analysts say, must be viewed within the context of Holmes `a Court's shaken financial empire post-``Black Monday.''

At the time of the plunge, his primary trading vehicle, Bell Group, was ``fully extended,'' notes Tony Moody, research manager at A.C. Goode & Co., a Melbourne brokerage firm. Bell had borrowed about US$3.5 billion against stock holdings in several major Australian, British, and US companies (Broken Hill Proprietary [BHP], Sears, Texaco, Pioneer Concrete, Standard Chartered Bank, J.N. Taylor).

When the market plunged, so did the value of those assets. Aggravating the loss of market value was an aborted debt offering. Bell had expected to float US$700 million in Eurobonds. But Merrill Lynch, the underwriter, pulled out a few days after the Oct. 19 market fall, leaving Bell tight on cash and exposed to the vagaries of the market.

In a month of fast liquidity building, Bell has sold prime real estate in Perth for US$140 million and raised $200 million by selling 2.5 percent of its 30 percent stake in BHP. And despite the investment loss, the Texaco sale gives Bell another $350 million in its pockets.

``Given all Bell's holdings, Texaco was the obvious investment to be sold,'' says John Porter, deputy managing director of Roach, Tilley, Grice & Co., a Melbourne-based share broker. He notes that in the Bell portfolio, Texaco shares had fallen the least in value. And $700 million was sitting in Texaco shares not paying any dividends.

Mr. Moody at A.C. Goode agrees that Texaco was the obvious sale, but he doesn't think Holmes `a Court is done selling. ``It's quite likely that he'll sell his Sears holdings and seek out local companies. The Australian market has fallen heavily, more heavily than the US market. There are better opportunities here now than elsewhere. I think he recognizes that.''

Speculation among Australian brokers is that Holmes `a Court could build on his 16.6 percent stake in Pioneer Concrete, an Australian company. Or he might take another run at BHP. He and another Australian financial kingpin, John Elliot, head of Elders IXL battled for BHP last year before a standstill agreement froze their positions.

But not everyone agrees with the BHP bidding scenario. ``I don't think he's in any position to make a bid for BHP now. He's still in an extremely difficult situation unless he acquires a cash-flow business. And I doubt he can raise the $8 to $10 billion [Australian] to go for it,'' says Mr. Porter, at Roach, Tilley, a firm known to handle Mr. Elliot's trading.

While some in the Australian media question whether Holmes `a Court has lost his golden touch, the Texaco sale is already looking rather shrewd. By selling half his stake (and all his voting rights) to the not-so-patient Mr. Icahn, Texaco is now perceived to be under pressure to resolve this Pennzoil suit. The stock price is rising. And Holmes `a Court may yet reap some profit on the other 5 percent in Texaco it still owns.

Says analyst Tony Moody in tones chess aficionados reserve for Grandmasters, ``Holmes `a Court looks at all the options, so you're never quite sure just where he's going to move.''